Silver Price Forecast – Consolidation Tightens as Traders Watch for Next MoveVolatility in silver tightens further as markets watch for indications this week on the direction of U.S. interest rates.
So far, silver is up slightly on the day, advancing $0.035 or 0.20% to $17.72. Strength in the dollar has kept downward pressure on commodity prices in recent weeks, including silver. The U.S. Dollar index (DXY) reached a new trend high today as it moves into its sixth week of an advance.
This week, markets will be watching U.S. Federal Reserve Chairman Jerome Powell’s testimony to Congress on Tuesday and Wednesday for any indication on the future direction of interest rates. Signs of lower rates to come could start putting downward pressure on the dollar, which could be bullish for commodities.
Silver Remains Stuck in Consolidation
Technically, silver prices remain congested as Friday was an inside day and Monday is currently shaping up to be an inside day. An inside day is reflecting consolidation on a daily basis, where the high to low price range of a day is contained with the price range of the prior day. In this case, depending on where silver closes on Monday, we have two inside days in a row for silver.
Many times, a move out of consolidation can see a pick-up in momentum in the direction of the breakout. Unfortunately, in the case of silver the inside day consolidation candles noted above are contained within a larger descending trend channel consolidation. This needs to be taken into consideration relative to the next move as a three-day breakout could be muted by the larger consolidation pattern.
Breakouts from Consolidation
A breakout of the three day range will occur on a move above the range high of $17.87, while a breakdown happens on a move below the low of the range at $17.57.
On an upside breakout, silver would first need to exceed potential resistance of the descending trend line at the top of the channel, followed by the most recent swing high at $18.08. A daily close above $18.08, followed by a daily close above the $18.33 swing high, confirms strength of the breakout and increases the likelihood of an eventual move above the top of the channel at $18.84.
Downside Price Levels
The $17.47 swing low is key short-term support on the downside, as a drop below it will signal further selling into the lower support zones. First, there is the 78.6% Fibonacci retracement at $17.29, followed by the swing low of the channel at $17.07